Risk management in Transport Infrastructure Projects (TIPs)

Developed by Iliana Dritsa

Overview

The main purpose of this article focused on risk analysis, identification and management techniques that are vital in a successful project delivery and enhanced communications between the stakeholders and organizations.

Transportation has become a vital need with the expansion of populations and the emergence of new technologies. Transport Infrastructure Projects (TIPs) are large scale projects in the transportation sector such as airports, high speed railways, bridges, and subway construction.

Risk is the possibility that actions and their resulting impacts will turn out differently than anticipated. Risk involves uncertainty which is something that applies to situations in which potential outcomes and causal forces aren’t understood completely.

The Nature of Risks in Transport Projects

Transport Infrastructure Projects (TIPs), technologically equipped projects, bring about numerous risks such as financial, technical, political, managerial, natural or legal. Being exposed to such risks in the planning and construction stage of TIPs, unexpected problems will likely emerge if possible risks are not identified and assessed beforehand. The identification of risks in the planning phase of a project and the arrangement of impact values has become a requisite in increasing the success as well as minimizing the problems of a project.

Highway construction projects are subject to higher risks and uncertainties than other construction projects due to higher investments and more complexity and their dependency on economic, political and social challenges (Wilson, Molenaar 2009). Researchers can investigate the causes and additional costs in these projects using analysis of risk events.

A history of problems appears in major infrastructure projects that are related with delays, cost overruns, or failed procurement. (Figure 1) Most overruns seem to be avoidable and foreseeable. However, most of the problems that are observed are due to lack of forward-looking risk management. The structuring and delivery of modern large infrastructure projects is extremely complicated, and they suffer from undermanagement of risk in all the stages of the value chain. And projects like that will continue to become larger and more complex, there is demand for more systematic and effective approaches and solutions

An overview of the general types of risk

Completion Risk

Tecnhical risks appear in every project and it’s a reflection of the engineering difficulties and the innovation degrees. The contractor usually guarantees completion of the construction on a fixed budget and a fixed date. Operational risk summarizes the chances and uncertainties a project faces in terms of functionality that arises from inadequate or failed internal processes such as operating efficiency, available capacity, security failure or fraud.

Market-related Risks

Market related risks refer to the risk associated with any investment decision. Demand is one crucial parameter due to the fact is hard to forecast and creates high levels of risk. Failures to reach traffic volumes have been observed because the users of airports, tunnels, ports, highways and bridges have alternatives and it is extremely difficult to forecast the behavior. Other sources of market risk are changes in commodity or equity prices, market movements, foreign exchange fluctuations or interest rate moves.

Institutional Risks

Institutional risk is defined as the risk that the regulator will not meet its policy regulations and organizational objectives. In some countries with emerging economies or in countries whose regulation and laws are incomplete, institutional risks are typically seen as greatest.

Research Method

A survey was developed from a known study from El Sayegh to gather information of the respondents and to categorize the risk factors related with the large-scale infrastructure problems. The findings end up in eight more specific different types of risk and risk factors. The risk categories are related with: Construction, Management, Financial, Technical, Economic, Legal, Political and Natural-Environmental. The following figure illustrates the whole process which was followed in the study to assess and identify the risks of the large-scale infrastructure projects.

Life Cycle Infrastructure management

A case study from a major transportation operator back in 2011, showed a significant number of complexities and uncertainties that exist along the life cycle of a project.

In the same study, company and its senior management wanted to enhance the institutional risk management capabilities, so they decided a different approach with a systematic step change from daily practices behaviors and mind-sets

How risk management can be improved day to day:

-One of the most important issues is communication. A transparent and reliable communication is vital for the success of a project. Often a lack of communication has been observed between top teams of maintenance and civil engineering. An initial approach would be each team to discuss regularly in a structured way the major risks and possible solutions and to maintain a focused and continuous risk transparency. -Interaction between contractor’s top teams and clients should be sufficient.

-One more task that companies face difficulties is to create risk management awareness from the top levels to the lower levels. Risk-mitigation actions could be improving the situation as they work as compliance mechanism.

- Lack of on-site transparency which can be improved with bottom-up escalation routes that will be clear or trigger points that are predefined

Conclusions

This article presents an overview of the different types of risk, the identification of risks in the planning and construction phase and it provides a conceptual framework that shows how to recognize them from an early stage. As the transport infrastructure projects become more complex, proper risk identification is a crucial element for the fate of the projects. Changes from inside the life cycle of an organization in risk management to huge final decisions are equally important for a successful project.

References

https://eprints.whiterose.ac.uk/113285/10/Paper%20transport%20V27.pdf